Interior of Blue Hole Sounds studio; the strange boxes on the floor are five-sided speaker baffles lined with spun fiberglass insulation and are used to isolate amplified instruments for better stereo separation during recording

In January '73, Sonobeat co-founder Bill Josey Sr. begins a string of recordings with promising artists: the first is Adobie Flatz, whose sessions yield three original songs, and Gary York & Evelyn, whose sessions produce just one track.

In February, Bill records two songs with country singer Joyce Spence and mixes a mono demo tape that he shops to Nashville-based country labels. Also in February, Bill records an extremely promising Latin-flavored rock group, Vita; he records the group in quad, a surrounding sound format he's been experimenting with for a couple of years. When Bill sends the Vita demo tape to Columbia Records for consideration, he notes that the group has enough original material to record two albums. But nothing comes of any of these recordings, which puts more financial pressure on Sonobeat, so Bill begins considering alternatives to an upcoming lease renewal of his studio space at the KVET Building on North Lamar in Austin. In March, Bill records another country duo, Johnny Lyon and Janet Lynn. Johnny's band, the Country Nu-Notes, who Bill will record in the coming year, provides instrumental backings for the sessions. Finally, in June, Bill reassembles the studio band Base that he put together the prior year, this time with singer/songwriter Ernie Gammage, formerly of the Sweetarts and Fast Cotton, as its headliner, and continues his quad recording experiments, this time with commercial aspirations for the resulting tracks.

Singer/songwriter Michele Murphy, while recording sessions for a potential Sonobeat release, suggests that Bill relocate the Sonobeat studios to Liberty Hill, a tiny community in the idyllic Central Texas hill country, 35 miles north of Austin. Property is still inexpensive there. Michele points Bill to a rarely-used stone church off Bagdad Road on the outskirts of Liberty Hill. The church property offers a secluded setting and includes enough acreage for Bill to bring in a mobile home for living quarters. The church itself, which Bill rents from the A.M.E. congregation that meets there only two Sundays a month, is sprawling, 30 feet wide by 40 feet long, providing 1200 square feet of open floor space, with walls 13-1/2 feet high and a vaulted ceiling peaking at over 24 feet. It's the largest studio facility Sonobeat ever has. Bill moves onto the property in August and begins outfitting the old church as Sonobeat's new recording studio, which he calls "Blue Hole Sounds" after a popular nearby swimming hole.

Refurbishing the old church into a recording studio – which includes wiring the building for sound, soundproofing doors and window coverings, and adding air conditioning – takes months longer and costs more than Bill has anticipated. But while he outfits the studio, Bill makes many friends in the Liberty Hill area, including Tom Penick, an aspiring country singer/songwriter who lives in nearby Leander. Tom offers to help around the studio in exchange for free studio time to record his own songs. Since Bill has plenty of studio time to trade, he accepts Tom's offer. And, since Bill still needs to offer out the recording studio facilities on an hourly fee basis to make ends meet, one of the first tasks he assigns Tom when the studio is ready is publicity. Tom circulates hundreds of "Blue Hole Sounds" fliers around Austin and the Hill Country, alerting musicians who've recorded with Bill in the Western Hills Drive and KVET Building eras to Sonobeat's new location and attracting artists who have never recorded at Sonobeat before. During fall, Bill records the third and final Herman Nelson song demo album for Sonobeat's sister company, Sonosong Music; however, instead of pressing vinyl albums to circulate to major label A&R departments, he makes a limited number of audiocassette dubs of the album to circulate to labels he feels will be most interested in Herman's folk and country tunes for cover recordings by nationally-known artists.

Bill gives Blue Hole Sounds a warm and welcome feel. He sets up the recording console and equipment rack at the front of the church, but because the church is still actively used by the A.M.E. congregation, Bill can't erect a full height wall to separate the "control room" from the rest of the studio; instead, he leaves the half-rail that divides the pulpit, altar, and choir area from the sanctuary. His recording equipment rack and mixing console occupy the pulpit and altar area, and the sanctuary serves as the recording floor. Bill sprinkles comfortable chairs and couches around the interior walls, hangs loudspeakers in each corner, and spreads area rugs across the floor. Outside, he sets up picnic tables under the live oak trees. In all, Blue Hole Sounds delivers on its promise as a unique, rustic environment, a recording studio trend far ahead of its time. By October, Bill has the studio largely in order and begins accepting custom, "work for hire" assignments to help defray his moving and studio retrofitting costs.

The simple Blue Hole Sounds flyer Bill circulates to solo artists and bands throughout Austin, Liberty Hill, and the Central Texas hill country, toward the end of 1974